Mississippi legislators will return to the capitol on May 6 to vote on a proposal to raise the state cigarette tax by 50 cents. This is effectively a 616% tax increase.
It is no secret that tobacco products are a dubious and declining source of revenue. Evidence from nearly every state that has unfairly targeted smokers for government revenue shows that very few tobacco tax hikes actually meet their revenue goals.
When New Jersey raised the cigarette tax 17.5 cents in 2007 they expected to bring in an additional $30 million. Not only did New Jersey not meet that target, the Garden State ended up with a net loss of $22 million in total tax revenue from tobacco. Maryland doubled the cigarette tax to $2 last year and cigarette sales dropped 25%, falling considerably short of projections.
To make matters worse, a cigarette tax hike’s effect would be felt predominantly by those least able to afford it. On average, smokers, whose median income is a little more than $36,000, make about 30 percent less than non-smokers.
State spending priorities should be funded through existing resources and with as broad of a base as possible. Raising taxes on a declining revenue sources like tobacco to fund state spending programs is a recipe for higher taxes in years to come. As tax revenues decrease and spending commitments mount, legislators will be forced to raise other taxes in the coming years for additional revenue. Furthermore, when combined with the higher federal cigarette tax, the revenue from an increased state cigarette tax will decline even faster than projected.
ATR will continue to reach out to Mississippi lawmakers to urge their opposition to this odious proposal. Stay tuned for more updates on this important matter.
Americans for Tax Reform